Great New York Timesfront-pager on Tuesday finally provides a substantive overview of the comprehensive hacking activities of the Chinese military against all manner of U.S. industries (with an obvious focus on defense).

Actually, the title was a bit of soft sell (China’s Army Seen as Tied to Hacking Against U.S.). This unit’s activities have been much discussed within the U.S. national-security community for several years now, so we are far past the “tied to” allegation. It’s clear that Beijing has the People’s Liberation Army conduct widespread cyber- theft all over the world, targeting the U.S. in particular.

One is tempted to label this cyber-warfare, and to declare that bilateral conflict in full swing, but I like to avoid such imprecision in language.

What we have here is industrial espionage on a grand scale – pure and simple. Yes, the PLA wants to know how to cause as much infrastructure mischief as possible in the event of a shooting war with the U.S., but let’s not be naive about the extensive and ongoing U.S. efforts to do the same to China (much less our Rubicon-crossing cyber strikes against Iran).

That sort of spying and military espionage is nothing new. All that says is that both sides plan to go heavy on cyber warfare in the event of war. It does not prove that cyber is its own warfare domain – as in, constituting genuine war in isolation.

As for the industrial espionage, China’s ambitions are magnificently broad. Check out the list of industries targeted, according to the Times:

Information technology

Aerospace

Government-related agencies

Satellites and communications

Scientific research and consulting

Transportation

Energy

High-tech electronics

Constructing and manufacturing

Engineering

International organizations

Legal services

Media, advertising, entertainment

Navigation

Financial services

Chemicals

Health care

Food and agriculture

Metals and mining

Education.

Clearly, this is a scope far and beyond thwarting America’s AirSea Battle Concept.

Now, I could rationalize this away by saying every economic power cheated and stole its way to the top – to include America across the 19th century. That doesn’t mean we weren’t inventive as well. It just means we did whatever was necessary to catch up. People – and countries – easily rationalize away all such thievery, and China’s got its “century of humiliation” plus our Pentagon’s AirSea Battle plans to cite.

But, in the end, all of that is really cover.

What really drives China is its own leadership’s fears. Beijing knows it has mortgaged just about everything to grow so rapidly. Besides the environment (which is enough, trust me), a good example is found in China’s unprecedented demographic aging – i.e., the vast piling up of elders. China’s entitlement burden there will dwarf our own. By mid-century, China will have more elders (400 million-plus) than we’ve got citizens (around 400 million total). The massive trade-offs on guns-vs.-butter are coming just as China’s reliance on foreign sources of food and energy skyrocket, and America “pivots” to East Asia in a transparent “boxing in” military containment strategy.

By way of contrast, consider this: North America is on the verge of energy self-sufficiency, and it controls the vast bulk of global grain flows. America will also age at one-third the rate of China over the next four decades in terms of median age (the U.S. will rise from mid-30s to around 40 by 2050, while China will rise from its mid-30s to its late-40s).

Frankly, the only thing China has in easy abundance is people and dirty coal. Neither is the asset they’re made out to be.

So why cite all this?

If I’m China, and I’m honest about my challenges, I can readily justify this vast industrial espionage campaign. Hell, I’m running the world’s biggest Ponzi economy (propped up by public investment and vast, hidden local government debt) and I know it. I’m also running a single-party dictatorship that will inevitably be blamed when the economy hits the S-curve slowdown that afflicts all rising powers (a.k.a., the middle-income trap). Simply put, there is no end to what I feel I have the right to steal in the near term. Everything is fair game.

This is why the Times‘ very sound suggestion of Washington seeking a cyber code of conduct with China ain’t going to happen any time soon. Besides the Pentagon’s new and deep love for this alleged warfare domain (and the funding it generates in otherwise tight budgetary times), the Chinese leadership’s fears about that nation’s future will only grow in coming years.

Beijing is going to get more frantic and more desperate with time. We may see supreme Chinese confidence regarding its glorious future, but nobody inside China with any genuine knowledge of the costs feels the same way.

Nobody with a brain, at least (and yes, China has plenty of stupid leaders with big mouths).

Now, you can choose to interpret this growing activity as “proof” of Chinese aggression, and whatever the driving internal rationale, it will indeed feature genuine aggression over time. But frankly, we’ve got a bigger problem coming in China’s inevitable slowdown/stalling. That’s a world-shaping dynamic capable of causing huge harm to most of humanity.

Meanwhile, America’s resurgence (e.g., an industrial renaissance fueled by cheap natural gas) is already in the works. Our innovative, democratic society can pull these resurrections out of its hat like clockwork. It’s who we are.

But China’s doesn’t have that. The growth-at-all-costs and political dictatorship model kills innovation and encourages thievery and lying and corruption on a systematic scale – to the point where virtually no one in China has any idea what the “truth” is anymore.

America fell to these scary depths in the boom-and-bust cycle of its “continentalizing,” post-Civil War economy of the 1870s and 1880s. Everything that is economically, socially and environmentally wrong with China today found some expression in America of that age. But get this: we were already a decently functioning – if highly-corrupt – democracy at that point. That’s why our subsequent and lengthy Progressive Era did the trick (God bless the Roosevelt family). By comparison, China has a much longer and more difficult “row to hoe.”

China’s leadership can deal with these domestic challenges in the same innovative fashion America once did (having to invent Chinese democracy along the way, mind you), or it can cling to the mistake of single-party rule and the closed thought it represents. The more it succumbs to the latter, the more cyber- thievery we’ll see (along with the more desperate everything). Again, we can mistake this for “power” and “confidence” and “aggression,” but it’s mostly about a nation running on fear.

And it’s only going to get a whole lot uglier before we can hope for any genuine improvement.

"China’s leadership can deal with these domestic challenges in the same
innovative fashion America once did (having to invent Chinese democracy
along the way, mind you), or it can cling to the mistake of single-party
rule and the closed thought it represents."

The suggestion that America is a democracy is amusing when one considers presidential executive privilege, a bought-and-paid for congress, gerrymandering, bogus elections, barriers against third parties (causing two look-alike parties), low election turnout (particularly among the young, the poor, and the minorities) and corporate citizenship, among other factors.

For the author: Did at any point in USA history the political is in as much disunity as right now? Did any time in USA history that our innovations involved as many Asians as right now? Did at any point in history did we have a globalized trading network like right now?

Being too optimistic can make you overlook the small details like this. Our previous "resurrections" are not more a 50% proof that we can do this every time because such thing hinges on the environment it is in.. This is something the author did not seem to calculate in.

The westerners have a tendency to over exaggerate and very underhanded in their dealings. The Americans do spy on China and I was told the Americans knew ALL the Chinese nuclear sites and even to the detail of launch e.g. the Chinese knocking of the defunct weather satellite. Who? supplied the Americans with these classified information. I really wonder! Computer hacking is part of CIA daily covert activities. Last year, France lodged a complaint to US administration regarding cyber espionage but this is NOT reported in the US mainstream media. I wonder why? The Americans have something up their sleeve and probably playing another Iraqi style of publicity. I sincerely wish the Americans do not be over confident of defeating the Chinese over a war, whether nuclear or conventional. I was told the Chinese would support their government in the event of a war between USA and China. May the best man wins.

The author got it right, everyone cheat to the top, and that includes good old uncle tom.

The problem with the author is China human capital, and cultural dominance is quite different from anything the west has ever seen. The Korean, Japanese, Taiwanese, Singapore, and Chinese diaspora all attest to the strength, and value of the blood, and culture. By that I mean if you dump a bunch of chinese in an Island, it is quite different from dumping a bunch of white people in the island. The Chinese are productive, resourceful, and highly upward mobile people. I don 't think white people understand this. In many ways, Chinese are just better people.

Too optimistic of America and too dismissive of China. Views have tended to be one-sided as well. To single out China as the big bad wolf in this world would turn America into a saint. Mm, makes one wonder why they have set up the CIA in the first place and also what the CIA has been up to recently. Softly, softly? Hush, hush?

The author has some good insights and a fair comparison between China now and the US in the late 19th Century, but the conclusion of this article is too negative, primarily due to an overemphasis on trends in materials (e.g. availability of natural resources) and demographics at the expense of more intangible assets such as the cultural dynamics and political will to makes necessary changes as the world evolves.

The US built the world's largest highway network and industrial infrastructure (e.g. a 50k ton hydraulic press) in the 50's, but are similar efforts being done or even theoretically do-able these days? China has already built the world's largest high-speed rail network, and will double its size in 7 more years. It built a 40k tonne press in 2009, just unveiled a 80k tonne upgrade last month and will have a 100k tonne monster in 2 years. Clearly, Chinese society and political system are far more energetic than their American counterparts right now. I am not dismissing the importance of material and demographics; they are quite important in determining history's winners and losers, especially in time scales of hundreds of years, but they are only part of the equation.

At the end of the 19th century, Argentina and Russia looked just as promising as, if not more so than, the US, but that promise was never fully realized because their societies could not maintain cohesion and focus on building their nations. As long as China can maintain its energy and flexibility, issues like the lack of natural resources, environmental problems and demographic drag can all be overcome at affordable costs (e.g. 1-2% GDP growth rate). China has a good track record in the past 30+ years, but there are worrying signs of onset of sclerosis in the bureaucracy. For example, the one-child policy is way past its expiration date and yet no change has been made, probably due to resistance from the large number of enforcers of this obsolete policy. The Hu administration has been a failure for its lack of urgency in renewing the government. We will find out if Xi is any different soon.

I like Clyde Prestowitz on economic issues. An Amazon review of Prestowitz's "The Betrayal of American Prosperity" which has been a result of forces that China, with its state-driven corporatism, avoids --

The author correctly identifies the two major problems that have been occurring since the late 1970's in the world economy-a nonsensical belief in an incoherent, intellectual monstrosity called " Free Trade," combined with massive Wall Street speculation and securitization based on debt leverage that was financed by a deliberately concentrated," too big to fail " private banking system created by Wall Street through a constant series of mergers,acquisitions and takeovers.This has led to the deindustrialization of the United States through the hollowing out , downsizing,and off shoring of the manufacturing industrial sector and outsourcing of millions of American jobs.http://www.amazon.com/The-Betrayal-of-American-Prosperity/dp/B003NYOBB4

I find this a really poor article really. Sounds really like a one-sided article trying to belittle China while trying to appear balanced by pulling straw mans in his arguments.

My points:

1. China's collapse is not just China's problem. It will be the world's as well. Chinese leaders/state will not go down without their guns blazing as the country collapses. There will be a severe nuclear fallout in the rest of the world and especially America as well. China is not the USSR and does not shun the use of nuclear weapons, nor is it afraid of the return nuclear strike. It fought the US over Taiwan despite not having nuclear weapons. It fought against the USSR when border incidents occured with preparation for all-out nuclear war. It dared to engage in a punitive expedition over Vietnam to protect allies in Cambodia and Thailand and to deal with the Vietnamese threat despite the USSR providing a nuclear umbrella over Vietnam. The western "educated" press needs to get their facts right and realise that actually, the government of China is trying to actually restrain nationalism and avoid war and conflict. The moment China transits to democracy, you can expect nuclear war against Japan and the US if the US tried to contain China.

2. There are over 40 million overseas Chinese across the world, with new and innovative technologies and ideas coming into China. In fact, the newest and latest avante garde ideas in governance and policy making have been at work in China, and has not been stagnating in 18th century ideas of Democracy, which tends to choose mediocre leaders and mediocre ideas which do not work in the long term interests of the state

3. China is not the US in the sense that it has had a national identity (common identity more accurate as the Nation-State idea only came about in the west in the 17th century) since 200 BC under the Qin and the Han Dynasties of China. The unity of the state is paramount and China is a largely homogenous population of 92% Han Chinese, compared to multiethnic empires like Austria-Hungary, Russian Empire, American Empire etc which have multiethnic populations with certain races serving in menial positions/less privelleged positions

4. The allies that the US is developing in the Phillipines, Malaysia, Singapore, Thailand, Indonesia, Taiwan (Republic of CHina) have a significant Chinese minority, with many holding dominant/overwhelming economic power/share. These have been hemorrhaging ideas and technology and intel to China since the rise of China. Let us not forget the Chinese who number 3 million in the US currently (all american citizens only, not including foreign students), who have greater ties to a civilizational state of 3 millenia, and less to the relatively young 227 years (though rich history of course) of the US. Let us also not forget the thousands of "Tibetans" and Chinese "dissidents" in the US. Many are actually not and just have to put up a good show and do the customary criticse China, slam Tiananmen square, Mao is mass murderer whatnot quotes to be accepted in the US.

5. Chinese leaders if anything are not dumb. Though it would be an advantage to China if the US thought so. Remember the Korean war? Similar underestimation has led to a series of American and UN defeats from the Yalu river all the way to Seoul. This is also a leadership that has successfully removed opium addiction in China, restored the territories of the Chinese state to their imperial height, eliminated foreign colonies in certain eastern seaboard cities, transitioned successfully from a failing Communist state to a successful Capitalist one, lifting 600 million Chinese (The entire population of the US twice over) out of poverty and overseeing 35 years of straight 10% per annum GDP growth. We must also however note the disastrous economic policies of Mao in the Great Leap Forward and the Cultural Revolution, though all in, the results are still impressive. All in all, Chinese leaders should continue to appear dumb to the US though such subtleties are pretty wasted on journalists like this one who has no idea of what the Chinese are doing anyway.

6. The tenacity and strength and innovation of the US is not at doubt. But neither is that of the Chinese. They have had the most sophisticated statecraft/bureacracy in the world since 200 BC, with a great propensity for innovations and discovery. The next time you use a foldable umbrella, drink tea, write on a piece of paper, go to a bank, use paper money or write cheques, take part in a nationwide exam, see a civil servant, use a book, wear a piece of textile made from machines, have ice cream, use condensed milk, use gunpowder based bombs against another oil-rich Muslim country, launch multi-stage rockets, pull a trigger, or even look at a mechanised timekeeping device, know that the Chinese were the first to invent these, and many were copied in the West. The Chinese have withstood all threats from Ancient to modern, from the bubonic plague, the mongol invasions, the depredations of the West, to the Japanese massacres/invasion of China but have still survived, and continue to thrive, stronger than before.

7. There is nothing in Polticial dictatorship or grwoth at all costs that will limit creativity and innovation. What limits it is IP which prevents further technology developemtn. If there was IP on fire, paper, the wheel and metals, then there is probably not much we can still invent, no matter how innovative one is. Hence this attack on the political system is just a guise to distract people from the fact that IP limits innovation and is an excuse for the exploitation of the many for the profits of the few.

Why are you so crazy?LOL Chinese are not going to use nukes, unless the US is going to us nukes on them. The west are much more violent than China. You are right that domocratic China would actually try to compete with the US. It is natural by the logic of self-interest.

Look, I personally think competition between China, and the US is a good thing. The US, and China can coexist. There obviously many good that comes out of it. Plus, the Northern Chinese are the superior race. It is the natural place of a superior place to be on top. Look, the white race can still be on top of the blacks, and Arabs. So what do you have to complain about?

*China has a foreign policy that features non-interference in other countries' affairs, and investing in those countries. The most rapidly-growing countries, economically, are in Africa. Trade between China and Africa has grown on average some 33 per cent per year since 2001. I have read that Africa taken as a whole may become China's largest trading partner by 2017 or 2018 surpassing even Europe or the United States. As I mentioned before, the current trade is over USD200 billion per year.

*The US has a different foreign policy, one based on creating instability (Libya) and military assistance -- they go together -- together with military spending that dwarfs China's. Considering also the US failed, expensive military campaigns recently in Asia, and the faux Asia-Pacific "pivot," which country operates on fears?

-China will have more elders [in 2050] than we’ve got citizens.

*But China has four times the population. The percentage of seniors over 65 will be about the same in both countries, 20%

-China needs energy and grain

*Yes, but China graduates engineers far in excess of the US, and more basic research is being done in China, while US grads have trouble finding jobs. The US graduates about 8,000 Ph.D. engineers, an estimated two-thirds of whom are not U.S. citizens, and they leave the country, many to China. So China can afford to buy oil and grain, which are fungible. Gas too -- there's no such thing as "cheap natural gas." There's a world price. Do you expect US producers to sell low when they can sell high? I wouldn't.

-[China] can cling to the mistake of single-party rule and the closed thought it represents.

*The idea that the "democracy - corporate" system is the best model has been disproved. China's model has actually worked better than the US model. Andy Stern--"The conservative-preferred, free-market fundamentalist, shareholder-only model—so successful in the 20th century—is being thrown onto the trash heap of history in the 21st century. In an era when countries need to become economic teams, Team USA's results—a jobless decade, 30 years of flat median wages, a trade deficit, a shrinking middle class and phenomenal gains in wealth but only for the top 1%—are pathetic."

@phillipshwong, I don't think it was unbiased. Regardless, I'm not looking for a house. Thanks. I am aware that there are individuals who score in the lower percentile ranks of IQ tests living within the borders of the United States. In fact, every country has them. In any case, I don't agree that those people are my worst enemies. If you really think Americans who don't score well on IQ tests are my worst enemies, then I suspect you aren't paying enough attention to the Americans who score well on IQ tests, hold positions of power, and implement counterproductive policies.